- Business Rules
What You Didn’t Know About Digital Mortgages
The entire mortgage industry seems to be hungry for digital mortgages, and why not? Everyone’s always online, digital is fast, and goodness knows lenders could use a way to lower costs and improve efficiency.
Yet no one agrees on what a digital mortgage actually is. For example, many believe a digital mortgage means the borrower filled out an online application. But that’s nothing new—online applications have been around for years. Others seem to think an eClosing makes a mortgage digital, but the closing is only one part of a very long and complex process.
One thing’s for sure: if digital mortgages truly exist, it shouldn’t take up to two months to close a loan. So, what exactly constitutes a digital mortgage, then?
A Practical Definition
To put it as simply as possible, a true digital mortgage maximizes automation and machine learning throughout the entire mortgage lifecycle. The goal of the digital mortgage is to make home financing simpler and easier for consumers and to make it compliant and profitable for lenders. But let’s start with borrowers. How do digital mortgages benefit them?
We recently surveyed more than 3,000 Millennials, Gen Xers and Baby Boomers about their most recent mortgage experience, and the results were quite surprising. Regardless of age or gender, all borrowers wanted the same four things from their lender: speed, convenience, security and personal interaction. Even the completely wired-in Millennials said they need more than an online experience—they wanted human help.
What lenders want from a digital mortgage isn’t much different. They too want a simpler, faster mortgage process. However, the housing market has shifted to a purchase loan environment, which is creating slower transaction speeds and pushing up costs. According to the MBA’s most recent estimates, lenders spend upwards of $8,000 to originate a single loan.
The Operative Word: Automation
For borrowers, a digital mortgage provides an engaging, intuitive user experience that lasts from application to closing and beyond. The key ingredient is automation.
When borrowers enter their information and upload documents, everything instantly enters the lender’s origination platform. This automatically kickstarts the loan disclosure process, borrower verifications, and credit, appraisal, and other reports. As the process moves forward, the borrower can sign disclosures electronically, follow the status of their loan, view and respond to closing checklists, or talk to a qualified mortgage expert if they need help—all within the same system.
From the lender’s standpoint, predictive analytics and machine learning are used to maximize leads and meet borrower expectations. Here, too, automation is key. With consumer behavior data, predictive analytics can be leveraged to determine who is likely to buy a home, refinance, or get a home equity loan. In fact, new tools now enable lenders to engage borrowers at what we call the “point of thought” – the precise moment a consumer embraces the idea of getting a mortgage.
Higher Volumes, Lower Costs
Combined with borrower data, automated marketing campaigns can be created to drive consumers to a lender’s online platform, where the borrower’s information can be used again to seamlessly populate an online loan application. Predictive analytics can even determine when borrowers need to speak to a loan officer. All of this happens entirely automatically—again, from the same origination platform.
We’re just scratching the surface. But in a digital mortgage, automation is maximized everywhere. For example, secondary marketers will use automation to create unique, personalized risk and market-based workflows. In underwriting, artificial intelligence can be applied to compare and verify loan data and automatically take any required actions, which reduces time and cost.
If all of this sounds like Fantasyland, you’re in for a real shocker. Each of the innovations we’ve just described already exists. In fact, market and regulatory pressures will soon force lenders to adopt digital mortgage technology.
But there’s no need to wait—you can learn all about digital mortgages in our newest eBook, “The True Digital Mortgage.”
The next time you hear someone talk about digital mortgages, ask yourself if they are truly automating everything that can be automated and if they are truly helping lenders originate more loans, lower costs, and reduce time to close. If they’re not, then they’re all sizzle and no steak.